RAISING CAPITAL: Tips From a Serial Angel & Deal Junkie. #CapitalAdvantage

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1 RAISING CAPITAL: Tips From a Serial Angel & Deal Junkie by Alixe Cormick Angel Investor; Member of: Kieretsu Forum, Vancouver Angel Technology Forum (Vantec), and various advisory boards; and a corporate securities lawyer TribeofZero.com October 22, 2015

2 Disclaimer Information purposes only: The materials and information contained in this presentation are intended to provide information (not advice) about equity crowdfunding and related matters. You should not act on this information presented without first consulting with an attorney. No Attorney-Client Relationship Created: This information on this presentation is not intended to create, and receipt of it does not constitute, an attorney-client relationship having been created by us with you or anyone else. Do not send us confidential information until you speak with us and receive our authorization to send that information to us. The act of talking to us informally or sending an to us will not create an attorney-client relationship. If you are not currently a client of Venture Law Corporation, your will not be considered privileged and may be disclosed to other persons. We promise, however, to keep your name confidential unless you tell us otherwise when talking to any regulators or third parties about securities law matters. No Warranties: The information provided in this presentation is provided as is. We make no warranties, representations, or claims of any kind concerning the information presented is complete. We are not responsible for any errors or omissions in the content of this presentation or for damages arising from the use of the information provided under any circumstances.

3 Outline of Discussion Your Initial Capital Structure Create a Solid Capital Raising Plan Find Investors Must Haves for Businesses Looking for Investors Your Pitch Deck Deal Breakers Understanding the Investment Process Last Minute Tips

4 Your Initial Capital Structure: Pre-Outside Capital Rough guideline for tech & biotech Founders: 80%-90% Team Members: 10%-15% Advisors: 1%-3% Compensate for value not hours worked! Put in writing and use vesting agreements

5 Your Initial Capital Structure: Pre-Outside Capital - Pricing Skin in the game Shares issued for less than $0.01 makes a Canadian IPO less likely Effect on pricing when looking for outside capital Create a cap table: Excel Example

6 Your Initial Capital Structure: Outside Capital Rounds Non-dilutive capital Common, preferred shares, and debentures Pre-seed Seed Series A and subsequent rounds

7 Your Initial Capital Structure: Outside Capital Rounds Round Amount Purpose Pre-$ Valuation Pre-Seed Seed $25,000 to $300,000 $300,000 to $1M Build & test MVP/Proof of Concept/R&D Beta Test/Launch Product/Proof of Product Solution Fit Super Seed $1M to $2M Working Business Model/ Proof of Product Market Fit/Product Traction Series A $2M to $30M Scale customer acquisition and revenue $100,000 to $1M $ Sources % of Business Bootstrap/FFB/ Crowdfunding/Gov Grants $1M to $3M Angels/Crowdfunding /Seed VCs/Coinvestment funds $3M to 10M Angels/Seed VCs/Crowdfunding/ Strategic Investors $10M to 100M VCs/Family Offices/ Crowdfunding/Institutional/ Strategic Investors/AltFin Platforms 5% to 25% 10% to 50% 10% to 50% 20% to 50%

8 Your Initial Capital Structure: Valuation Geography and investor group dependent Look for comparable businesses Ultimately a negotiation between investor and business Expect 10% to 30% dilution per round Use convertible debt or preferred shares if uncertain or to avoid significant dilution

9 Create a Solid Capital Raising Plan Determine your key milestones or inflection points that will impact your value What is the minimum amount you need to get to each point What non-dilutive sources of capital are available to you at each stage? Identify what you want to offer investors

10 Create a Solid Capital Raising Plan Make a list of contacts that can help Old school versus new school capital raises Identify potential investors or credible market intermediaries Sample, track, learn, and improve what you are doing to raise capital Keep all doors open

11 Friends and family Angel investor networks Find Investors: Identification Free or almost free angel investor forums Pay to play angel investor forums Online accredited investor portals Individual angel investors and venture capital firms Introductions from professional advisors and others Identification through research Signaling angel investors and venture capital firms Third-party finders

12 Method 1: Find Investors: Approach Well connected angel/vc assists with introductions Commitments; Downstream intros and more commitments Method 2: Credible market intermediary streamlines process

13 Must Haves for Businesses Looking Tax credits for Money Small Business Venture Capital Act Scientific Research And Experimental Development Tax Incentive Program Government grants NRC Concierge Service Product or service that addresses a large market need versus a want or nice to have Team that can execute Solid understanding of business and challenges

14 Your Pitch Deck Standard Pitch Deck Slides: Description of your company Team Problem or need (market opportunity) Solution (make sure your name is on this slide) Value proposition to investor Revenue model Strategy to capture that market

15 Your Pitch Deck #2 Standard Pitch Deck Slides (continued): Channels or verticals; Any traction you have; How will you build momentum; Strategic relationships (partners, customers & LOIs); Competitors, Differentiation & Barriers to Market; Financial overview;

16 Your Pitch Deck #3 Standard Pitch Deck Slides (continued): Investments to date and projected rounds you will need Simple top line 5 year projection (revenue, expenses, net) Identify break-even and profitability Use of proceeds (may use a timeline or roadmap) Capital request ask for the money Risk factors Summary & contact information

17 Bare Essentials: Your Pitch Deck #4 Description of your company; Team; Problem or need (market opportunity); Solution (make sure your name is on this slide); Value proposition to investor; Any traction you have; Use of proceeds (may use a timeline or roadmap); Summary & contact information.

18 Deal Breakers Raising $ to replace debt; pay big salaries; develop an idea not a business; or with no clear purpose One man team No personal skin in the game Unrealistic valuations Serious character flaw(s)

19 NDAs Non-Disclosure Agreements Exceptions but, seasoned Angel Investors and VCs will not sign Business plan contains no proprietary information If you really want an NDA: narrow coverage introduce at due diligence stage

20 Understanding the Investment Process Long process Meet and greet first step All investment basics must be met Due diligence review Terms may be renegotiated Close in person

21 Last Minute Tips Securing a key investor early will make raising capital significantly easier In person meeting = 5x more $ than an and 3x more $ than a phone call People only invest if they know you, know the business, and like the investment opportunity

22 Thank-you and Good-Luck Venture Law Corporation West Hastings Street Vancouver, BC V6B 1P1 Phone: Fax: Website: Blog: Twitter: Google+: AlixeCormick